Surface water flood forecast- and nowcast-based loss estimation for resilient finance

Hazard warning systems are being increasingly employed globally, though these fail to account for surface water flooding -- the greatest flood risk of all -- or flooding from ordinary water courses. Previsico currently delivers to asset owners a warning and forecast service for surface water flooding at 25m resolution using its proprietary live hydrodynamic modelling software.

Flood forecasts are generated every three hours and are produced using the latest rainfall nowcasts and forecasts. The service issues property-level alerts so assets can be moved to safety, and organisations can improve their flood response. It is the first technology on the market to offer flood warnings that cover surface water and ordinary water course floods.

It is also continuously improving, generating high-confidence, property-level real-time predictions. However, whilst warnings are important for mitigating physical impacts and losses, they can be better tailored for coordinating the responses of insurers, re-insurers, and the wider finance sector. Of particular note, the accuracy of catastrophe claim reserves that depends on correct and timely loss estimates can directly affect the solvency and stability of a company.

Loss estimation tools combining flood nowcasting and forecasting for perils that are rarely accounted for (e.g. surface water and ordinary water course flooding) are urgently needed to help insurers and reinsurers make reserving decisions with confidence. Such tools can further support hedge funds in issuing catastrophe bonds covering areas at low risk of flooding.

For example, if predicted losses are negligible, catastrophe bonds are not triggered and the hedge funds are not liable for pay-out to their clients, increasing profits. Timely financial loss estimates delivered in a timely fashion can be crucial for helping financial and insurance industries weather climate shocks.

This project will develop a loss estimation algorithm parameterised using Previsico's world-leading forecast- and nowcast-derived flood extent and depth data and asset exposure and vulnerability data to produce financial risk forecasts and nowcasts. These will in turn be delivered to customers via Previsico's flood dashboard and alongside asset alerts and flood intelligence, will support emergency response coordination, helping deliver direct and indirect savings to assets and critical infrastructure, and mitigation of impacts on the wider economy by supporting business continuity.

To ensure the developed product meets the needs of end users, Swiss Re Corporate solutions will support this project by: - Supporting product design with relevant knowledge, insights, and feedback. - Providing opportunities for testing the proposed solution with customers.